After warnings from Moody's and Fitch, the rating agency S&P Global Ratings (formerly Standard & Poor's) decided to maintain France's sovereign debt rating at AA− as well as its stable outlook, Friday November 29, while the government is multiplying compromises to try to escape a motion of censure, which could intervene as early as next week on the Social Security budget and plunge, the executive believes, France into a ” storm “ economic and financial.
“Despite political uncertainty, we expect France to comply – with a delay – with the European budgetary framework and gradually consolidate its public finances in the medium term”said the American agency in a press release.
The rating agency's decision reflects the “credit given to the government” of Michel Barnier, declared the French Minister of the Economy, Antoine Armand. “By maintaining France's rating, Standard and Poor's demonstrates the credit granted to the government to reduce the deficit and restore our public finances. The agency, however, underlines the risk associated with political uncertainty which would call into question this trajectory.he underlined in a written reaction sent to the press.
In May, the American rating agency lowered the French rating by one notch, from AA to AA−, with a stable outlook, reducing the risks of a further downgrade in the immediate future. In October, Moody's and Fitch maintained the French rating with a negative outlook. After a decline in pensions or employer contributions, the government agreed not to increase a tax on electricity beyond its level before the tariff shield, in order to satisfy the National Rally (RN), which threatens to join forces with the left to overthrow him.
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For François Villeroy de Galhau, the draft budget goes “in the right direction”
Despite these “adjustments” carried out in the draft budget, which initially provided for 60 billion euros of effort in 2025, the Prime Minister assured “everything to stay around 5%” public deficit in relation to gross domestic product (GDP), after an expected slippage to 6.1% in 2024. France would return below the European ceiling of 3% in 2029, a trajectory validated by Brussels.
And politically, the risk remains. On Friday, the leader of the RN, Marine Le Pen, did not seem willing to give up censoring the government next week, accusing it of concessions “not financed by structural economies” and of “precipitate the financial crisis”.
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The governor of the Bank of France, François Villeroy de Galhau, warned on Friday that “take back control” of public finances was the responsibility of “national interest” so as not to increase the cost of the debt. The government's draft budget will “in the right direction”according to him.
This political uncertainty, which has continued since the dissolution of the National Assembly in June, is agitating the markets. The gap (spread) between French ten-year sovereign rates and those of Germany, considered a safe haven in Europe, reached a peak since 2012 at the start of the week. France's borrowing rate is higher than those of Spain and Portugal, and for the first time on Wednesday it briefly overtook that of Greece, a country which had come close to bankruptcy.
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